If you or someone in your family has a federal student loan in default, this is the season to act. The Department of Education, working with the Department of the Treasury, plans to restart wage garnishment on defaulted federal student loans this fall. Notices are going out to borrowers around July 1, and most will have a 90-day window to get into a repayment plan before collections begin.
This affects a lot of people. As of the end of 2025, about 7.8 million borrowers owed roughly $179 billion in defaulted federal student loans. Many of them are parents — and if you are a parent in default, it can also block your ability to help pay for your child's college this fall.
The good news: default is fixable, and the steps to fix it are clearer than they have been in years. Here is what is happening, what collections can actually take, and exactly what to do before the deadline.
What is happening with student loan collections in 2026
Federal student loan collections have been off and on since the pandemic. Here is the short version of the recent timeline:
- In 2025, the Department of Education announced it would restart involuntary collections on defaulted loans.
- In early January 2026, the first wave of wage garnishment notices went out to defaulted borrowers.
- On January 16, 2026, the Department paused all involuntary collections while it rolled out the new repayment system created by the One Big Beautiful Bill Act (OBBBA).
- Now, the Department says garnishment and Treasury offsets will resume this fall. Borrowers are receiving notices around July 1 and generally have 90 days to enroll in a repayment plan first.
There is one more change behind the scenes. In March 2026, the Department of Education and the Department of the Treasury signed an agreement called the Federal Student Assistance Partnership. Treasury is taking a bigger role in handling defaulted loans and returning borrowers to repayment. For families, the practical takeaway is simple: the government is serious about collecting this time, and the tools it uses are powerful.
What collections can actually take
When a federal student loan is in default, the government does not need to sue you or get a court order. It can collect through:
- Wage garnishment. Up to 15% of your disposable pay (your paycheck after required deductions) can be taken automatically. Your employer is required to comply.
- Treasury offset. The government can keep your federal tax refund, and it can take a portion of certain federal benefits, including Social Security payments.
- Damage that compounds. Default sits on your credit report, collection fees can be added to your balance, and the debt does not go away on its own.
You must receive at least 30 days' notice before garnishment starts. During that window, you have the right to request a hearing — for example, if garnishment would cause serious financial hardship, or if you believe the debt amount is wrong. Requesting a hearing within 30 days can pause garnishment until a decision is made.
How to know if you are in default
A federal loan typically enters default after 270 days (about nine months) of missed payments. If you are not sure where you stand:
- Log in to your account at StudentAid.gov and check your dashboard. Defaulted loans are flagged there.
- Look up which servicer or agency holds your loan. Defaulted federal loans are usually handled by the Default Resolution Group, not your old servicer.
- Check your mail and email. Garnishment notices include your deadline and your options — do not ignore them.
If years of confusing servicer transfers left you unsure what you owe, you are not alone. The federal database at StudentAid.gov is the source of truth, and it is free to check.
Why a parent's default can block a student's college plans
Here is the part many families miss: default does not just hurt the borrower. It can directly limit how you pay for your child's college.
- Parent PLUS loans are off the table. A parent who is in default on a federal student loan is not eligible to borrow new federal loans, including Parent PLUS. If your family's fall plan depends on a PLUS loan, a defaulted loan from your own school days can sink it.
- Your own return to school is blocked too. Borrowers in default cannot receive new federal student aid — no Pell Grants, no federal loans — until the default is resolved.
- Cosigning gets harder. Default damages your credit score, which makes it harder and more expensive to cosign a private student loan for your child.
The timing matters. Fall tuition bills arrive in July and August. Loan rehabilitation (more on that below) takes nine months, but consolidation can resolve a default in weeks. If a parent in your household is in default, dealing with it now — before the fall bill arrives — protects both your paycheck and your student's funding options.
For a refresher on how default works and what it costs, see our guide on what happens if you default on student loans.
Three ways out of default
There are three established paths out of default. Each has trade-offs.
Option 1: Loan rehabilitation
Rehabilitation means making nine on-time monthly payments over ten months. The payment amount is based on your income and can be quite low — sometimes as little as $5 a month for borrowers with little discretionary income.
Why families choose it:
- Once you complete rehabilitation, the default is removed from your credit report (the late payments stay, but the default notation goes away).
- You regain access to federal student aid, deferment, forbearance, and repayment plan choices.
- If garnishment has already started, it must stop after you make five qualifying rehabilitation payments.
One helpful change: under OBBBA, borrowers can now rehabilitate a loan twice instead of once. If you used your one shot at rehabilitation years ago, you may have another chance.
The downside is time. Nine months means a parent starting rehabilitation in July would not be aid-eligible until next spring.
Option 2: Loan consolidation
Consolidation combines your defaulted loan into a new Direct Consolidation Loan. To consolidate out of default, you either make three on-time payments first or agree to repay the new loan under an income-driven repayment plan.
Why families choose it:
- It is fast — often resolved in 30 to 90 days, which can restore federal aid eligibility before spring semester, and in some cases before fall disbursement deadlines.
- It moves you into a manageable, income-based monthly payment.
The downside: the default record stays on your credit history (it is reported as paid through the new loan, but the past default is not erased), and collection costs may be added to the new balance. To compare your income-driven options after consolidating, our income-driven repayment plans comparison walks through each one.
Option 3: Pay in full
Paying the full balance plus interest and fees ends the default immediately. For most families this is not realistic, but if the defaulted loan is small — say, a few hundred dollars left from years ago — it can be the cheapest and fastest fix.
If a garnishment notice arrives: your 30-day and 90-day clocks
Treat the notice like a bill with two timers attached:
- Within 30 days: You can request a hearing if you believe the garnishment is wrong or would cause financial hardship. This is also the window to object to the amount.
- Within 90 days: Most borrowers getting notices around July 1 have roughly 90 days to enroll in a repayment plan before garnishment begins. Use this window to start rehabilitation or consolidation.
- Right away: Contact the Default Resolution Group through StudentAid.gov. Ask which options you qualify for and get the payment amounts in writing.
- Do not pay anyone who charges a fee. Getting out of default is free. Companies that charge hundreds of dollars to "fix" your loans are doing what you can do yourself with one phone call.
How this connects to the July 1 loan changes
The collections restart is landing at the same time as the biggest federal loan overhaul in a generation. On July 1, 2026, the new Repayment Assistance Plan (RAP) launches, with payments between 1% and 10% of income. The SAVE plan is gone, Grad PLUS ends for new borrowers, and new Parent PLUS caps take effect. Part of the reason the Department paused collections in January was to give defaulted borrowers a path into these new plans before garnishment resumed.
If you consolidate out of default this summer, the repayment plan you land in will be shaped by these new rules. Our breakdown of how the new RAP plan handles forgiveness credit explains what to expect.
What to do this week
Paying for college is stressful enough without a surprise 15% cut to a paycheck. A short checklist:
- Log in to StudentAid.gov and confirm whether anyone in your household has a loan in default.
- If you find a default, contact the Default Resolution Group and ask about rehabilitation and consolidation. Get amounts and timelines in writing.
- If a garnishment notice has arrived, calendar both deadlines: 30 days for a hearing request, 90 days to enroll in a repayment plan.
- If your student needs aid for 2026-27 and the FAFSA is not done yet, file it now — resolving a parent's default restores PLUS eligibility, but only if the FAFSA is on file.
- Map out how default resolution fits your student's full funding picture. Create your free CollegeLens plan to see your real gap for fall and the cheapest ways to cover it.
Default can feel like a hole with no ladder. It is not. Millions of borrowers have rehabilitated or consolidated their way out, and the window before collections restart this fall is the best time in years to do it.
-- Sravani at CollegeLens